IMF and World Bank Announce US$176 million Debt Relief for the Union of the Comoros

Comoros

The International Monetary Fund (IMF) and the World Bank’s International Development Association (IDA) have decided to support US$176 million in debt relief for the Comoros, representing a 59 percent reduction of its future external debt service over a period of 40 years. [1]

The Boards of Directors of both institutions [2] determined that the Union of the Comoros has fulfilled the requirements to reach the completion point under the Heavily Indebted Poor Countries (HIPC) Initiative, the stage at which the HIPC debt relief becomes irrevocable and the country will benefit from the Multilateral Debt Relief Initiative (MDRI).

The requirements met by Comoros included, among others, the satisfactory implementation of a Poverty Reduction Strategy Paper (PRSP), the maintenance of macroeconomic stability, progress in public financial management and governance, reforms on telecommunications and energy, a national measles vaccination campaign for children to achieve 90 percent coverage nation-wide, and improvements in debt management. Comoros was granted a waiver on the requirement related to the provision of textbooks and school kits for vulnerable children, as the government has adopted a new policy focusing on improving learning quality.

Mbuyamu Matungulu, IMF mission chief for Comoros, said: “Comoros has made substantial gains in macroeconomic stability in the last years; economic activity is trending up, and the fiscal position has considerably strengthened. Debt reduction under the HIPC and Multilateral Debt Relief Initiatives reinforces these achievements and uplifts the country’s growth and poverty reduction prospects. With continued close adherence to reforms and steady donor support, the improved outlook can translate into tangible gains in living standards for the poor.”

“Debt relief is a development opportunity for the Comoros,” saidHaleh Bridi, World Bank Country Director for Comoros. “Debt relief will free up resources in the country to fight poverty and improve the health and education of the population,”

Of the resulting reduction of about US$176 million, about 86 percent will come from multilateral creditors, and the remaining from bilateral and commercial creditors. MDRI relief provided by the World Bank’s IDA and the African Development Bank Group would save Comoros US$83 million in debt service over 29 years. There remain no loans eligible for MDRI relief from the IMF.

Full delivery of debt relief (HIPC Initiative, MDRI, and additional bilateral assistance at the completion point) will considerably reduce the debt burden of the Comoros. The annual external debt service will fall by 69 percent, from an average of 14 million for the period 2013-2021 to 4 million. Nevertheless, both the IMF and the World Bank consider that despite the improvement in the Comoros’s debt indicators the country remains vulnerable to shocks to exports and GDP.

Comoros becomes the 35th country to reach the completion point under the HIPC Initiative. The completion point marks the end of the HIPC process, which started in 2010 when the Executive Boards of the IMF and the World Bank’s IDA agreed that the Comoros had met the requirements for reaching the decision point, the stage at which countries start receiving debt relief on an interim basis.